NRI Bank Accounts and you. What's your best choice?

As a Non Resident Indian (NRI), you are still connected to your motherland in more ways than personal bonds.

As a Non Resident Indian (NRI), you are still connected to your motherland in more ways than personal bonds. In the interests of yourself and your family, managing your financial concerns in India is a priority. So it is important to familiarize yourself with the options. The RBI (Reserve Bank of India) Regulations allow you to open the following types of NRI accounts in India – NRE Accounts, NRO accounts, and FCNR (B) account.

NRE Account – Non Resident (External) Account

This account accepts deposits only through foreign currency remittances from outside India. Such accounts cannot receive any rupee credits, thus they are not suitable if you have any income sources within India. However, NRE accounts are beneficial when you wish to repatriate funds, as the account holder can transfer the funds outside India without any restrictions. Furthermore, India’s Income Tax laws provide an exemption to the account holders in respect of interest income on NRE accounts. You can invest in such accounts to earn tax-exempt returns and then repatriate the funds back. NRE accounts can be held by the NRI as the sole account holder or jointly with another NRI or Resident Indian.

NRO Account – Non Resident (Ordinary) Account

The NRO account offers you better flexibility than NRE. NRO allows the account holder to receive foreign currency remittances from outside India, as well as rupee credits within the country. It is equivalent to a regular rupee savings account with the added bonus of also handling foreign currency. While the funds in NRO accounts can arrive from any source through regular banking channels, the funds can be withdrawn or utilized for investments within India. As far as repatriation of funds is concerned, the interest earned on such an NRI account is freely repatriable. However, the principal amount can be transferred outside India only within specified limits. Unlike tax concession on interest income on NRE accounts, the interest income on NRO accounts is taxed at the regular tax rates as applicable to the individual. NRO accounts find their utility in respect of accepting rupee credits as well as allowing joint operations with another resident.

FCNR (B) Account – Foreign Currency Non Resident (Bank) Account

The FCNR (B) account is least flexible but ideally suited to the investment needs of the NRI. While the NRE and NRO accounts can be opened as bank accounts or term deposits, FCNR (B) accounts can be opened only as a term deposit/ recurring deposit. Additionally, such accounts are denominated in specified foreign currency, unlike other NRI accounts denominated in Indian currency. The deposit holders can repatriate the maturity proceeds of FCNR (B) deposits without any restrictions. Like the tax benefit on NRE accounts, the interest income on FCNR (B) deposits is also considered exempt. Furthermore, an FCNR (B) account can be held by the NRI either in his/ her name or jointly with another NRI only and not with another resident.

As you can see, the different types of NRI accounts all carry specific benefits and restrictions. You will have to carefully consider your needs for the near future, in order to choose the right NRI account that best matches your banking requirements.